So How Much Is Lyft Really Worth?

Bad news travel fast. The news about Uber and China’s Didi merger came quickly all the way from China to Lyft’s offices in San Francisco last August and shattered the company’s global dream. Lyft partnered with Didi as its Chinese branch in 2015, so that Lyft users can drive Didi when they visit China, and vice versa: Chinese visitors can ride Lyft and bill Didi when traveling to the U.S. That international partnership was the underprivileged alliance’s answer to the global reach chased by the Uber behemoth. But the August deal that merged Uber into Didi Chuxing in China put an end to all this. It didn’t just eliminate one of Lyft’s best partners. It took it all the way to its biggest competitor across the street.

That wasn’t the only bad news that came upon the second largest ride-hailing this summer. A story that ran across few media outletspresented Lyft as an ultimate loser, a second-tier ride-hailing app that is desperate for a buyout and gets a no shop answer from the entire industry: From Ford and Microsoft to Google (Alphabet), Amazon and Apple. According to the rumors sparked in the media, Lyft sought as much as $9 billion in the buyout offer.

But the reality for Lyft is probably a little more complex and less unfortunate. Here are some success factors worth noticing when talking about lyft:

1.Although Google, Apple and the legacy car manufacturers such as BMW, Fiat and Toyota all have their driver-less car initiatives, no real automotive company will survive in the future without the capacity to manage a fleet of millions of vehicles, matching them with passengers, navigating them in congested roads and billing the passengers. But that is not enough, as a ride-hailing fleet management must be efficient in a manner that will make a company profitable in the long term, for instance, by using pooling technologies such as Lyft Line and UberPool. Although Lyft didn’t get the $9 billion it wanted, it is today one of only two ride-hailing fleets management companies that have a broad presence in the U.S market. GM partnered with Lyft a year ago and paid $500 million (for 9% stake, valuing Lyft at $5.5 billion) for that reason, choosing Lyft to manage its future autonomous cars fleet. According to The Information, The rise of self-driving cars would also improve the economics of Lyft’s business, as drivers now take 75% to 80% of gross revenue. In five years from now, lyft’s founders can find themselves managing a fleet of self-driving taxis developed by GM and Cruise. That is a very prestigious place to be in.

2. Lyft is in a great momentum. According to The Information, Lyft is growing faster than Uber in The U.S and is on the track to be profitable by 2018. Lyft’s rides grew from 15 million in July 2016 to 18.7 million in December, 33.5% growth. At the same time, Uber’s number of rides grew from 62 million to 78 million. The Information adds that Lyft’s strongest cities are San Francisco and New York, while Chicago, Los Angeles and Dallas are is biggest gains from 2016. But 2017 could mark the year in which Lyft will get a green light also in new markets such as upstate New York, Houston, Austin, St. Louis and Kansas City. In 2016 Lyft had managed to reduce its expenses on subsidies, going few steps forward towards profitability in 2017 or 2018. The ride-hailing app lost about $600 million last year after generating $700 million in revenue.

This matches data collected by Zirra shows a surprising trend. Look at the data from Similar Web, comparing Lyft’s iPhone app popularity to that of Uber:

Now look at a simple Google Trends query comparing Uber’s popularity to that of Lyft.

This graph, derived from LinkedIn, proves that Lyft makes special efforts to expand geographically and open new communities of drivers and riders all around the U.S:

A look at these indicators shows something good happens to Lyft these days.

3. Zirra, a company that has developed AI and machine learning technology to effectively analyze the private tech market, has also produced interesting data on Lyft. According to the valuation process, based on 85 different data sources, Zirra estimated Lyft’s current valuation at $5.7-$5.8 billion. This is not a high valuation if you compare it to the $5.5 billion price tag Lyft got during the GM financial round. But speaking of an exit, Zirra estimates that within a period of 2-3 years, Lyft could go public or be sold for $8.5-8.6 billion. It is far away from the $68 billion Uber’s valuation (only $52 billion, according to Zirra’s algorithms), but it still keeps lyft inside the prestigious club of the top 20 private tech companies in the world. [Click here for Zirra full spotlight report on Lyft]

Nevertheless, there are some risk factors that Lyft is facing for some time:

1.Uber ended its battle in China, announcing a truce with Didi Chuxing. The deal also brought the ride-hailing giant $1 billion in Cash to fuel its Indian mission against Ola, but Uber will probably use it to battle Lyft inside the U.S, subsidizing rides.

2.Lyft is still a local ride-hailing app that doesn’t strive to operate outside of the U.S. Even Didi Chuxing, that was considered to be a local Chinese player, expanded across Latin America with a $100 million investment in 99, a Brasilian ride-hailing app. Amir Efrati from TheInformation.com said that lyft is unlikely to expand its actual operations overseas due to high costs and the need to raise billions more for that goal, but added that the company might expand to “cities close to the U.S”, possibly in Canada. Af future expansion into other cities in the U.S and Canada will go hand in hand with future expense as Lyft will have to subsidize riders and drivers in those new territories.

3.According to LinkedIn, Lyft’s total employee count growth had reached a halt.

4.Almost everyone develops an autonomous car, but it is still unclear who will dominate that industry. Lyft made a bet on GM and Cruise. It is a low risk bet, but it is a bet after all.

Zirra’s AI technology can raise flags over its success and risk factors